Does My Company Need an Online Payment Gateway?

By July 17, 2019 E-Commerce
Online Payment Gateway

Whether your website is a full E-Commerce portal or you simply want the ability to sell gift cards online, you want your customers to have a safe, quick, and user friendly payment system. In order to accept payments online with credit or debit cards, you will need to be setup with a payment gateway. This will allow your transactions to be protected from fraud, support diverse payment options, and be convenient to use for customers.

How Does a Payment Gateway Work?

Payment gateways are services that authorize and process payments online. They ensure that a customer’s credit card number, expiration date, and CVV number are safely passed from a customer to a merchant using security protocols and encryption. As a merchant, you cannot simply ask your customers for their credit card information online for you to physically process in-store. You need some sort of payment processor to transfer that personal data from your website directly to your bank without you having to do anything.

A payment gateway transfers your customer’s credit card information safely from a company’s website, application, or mobile device to your payment processor or bank using encryption.

Payment gateways can do the following transaction types:

  • Authorization – This transaction checks to make sure a customer has enough funds in their account to pay for the merchandise. The actual money is not transferred during an authorization. This type of transaction is typically used for orders that take some time to ship and/or manufacture.
  • Capture – Capturing is when the authorized payment is actually processed and funds are transferred to a merchant’s account.
  • Sale – A sale is an immediate purchase and a combination of authorization and capture transactions where the cardholder is initially authorized and funds may be captured. Sales can be used for immediate purchase situations.
  • Void – If funds have not already been captured then a void or refund can be processed.

The payment processing process includes the following steps:

  • A customer checkouts on a merchant’s website by filling out the necessary payment fields and the data is encrypted and sent to the merchant’s web server through a SSL connection.
  • A merchant’s server then passes the transaction data to the payment gateway securely through a SSL channel.
  • A payment processing company , which is connected with both a merchant’s account and a payment gateway transfer the data back and forth, till it is sent to a credit card network (Visa, Mastercard, American Express, etc.)
  • The credit card network verifies the transaction data and passes it to the bank that produced the cardholder’s card.
  • The bank then accepts or denies the authorization and returns either a transaction status or error details back to the payment processor.
  • The status of the transaction is passed to the payment gateway and the website.
  • The customer then receives a message with the acceptance or denial of their payment. In the checkout process this will typically show as a confirmation message.
  • The funds will then be transferred from the issuer bank to the merchant’s account within one or two days.

Choosing the Right Payment Gateway Provider

Since payment gateway providers are third party services they require a fee to process and authorize your transactions. Typically transactions are billed depending on the amount, location (national or international), and product type (physical or digital). Each provider will have their own terms and usage fees that will typically include the following:

  • Payment gateway setup fee
  • Monthly gateway fee
  • Merchant account setup
  • Processing fee for each transaction

Make sure to read all the documentation for any additional hidden fees or additional expenses.

Payment Gateway Provider Options

  • Stripe – Ecommerce payment solution that accepts all major payment methods including Apple Pay, WeChat Pay, Alipay, and Android Pay. Stripe supports international payments with 135 different currencies and allows integration with third party platforms. No setup fees and charges 2.9 percent plus $0.30 per transaction. There are additional customized pricing packages for larger sized businesses available.
  • PayPal – The most widely known and accepted electronic payment method in the world is PayPal. It offers scalable solutions for all sized businesses. They offer multiple services such as PayPal Payments Pro, PayPal Express Checkout, etc., which can allow for a PayPal button to be placed on your website for checkout or directly integrated within your website not forcing customers off your site to pay. The PayPal account type will determine your percentage fees but typically 3.9 percent and $0.30 per transaction. There are no setup fees. PayPal accepts all major credit cards as well as PayPal, Venom, Android Pay, Apple Pay, and Bitcoin. It also allows users to input funds directly in their personal PayPal account without the need of a bank account to use for online purchases.
  • Amazon Payments – From the eCommerce giant, Amazon payments, is designed for online retailers. Integrated through an API, it offers a semi integrated payment solution that is mobile focused but available from multiple devices. It supports all major payment methods and bills 2.9 percent plus $0.30 per transaction.
  • Authorize.net – Designed for small and medium sized businesses, Authorize.net supports all major payment methods as well as PayPal and Apple Pay. It’s major focus is protecting users from fraudulent transactions through its Advanced Fraud Detection Suite. Pricing is 2.9 percent plus $0.30 per transaction. It requires a $25 monthly fee for the gateway and $49 for a merchant account setup, but you can signup for only the gateway if you already have an existing merchant account.

Conclusion

Partnering with a payment gateway provider is the best way for an online merchant to gain trust and confidence from their customers, support multiple payment methods, and protect online payment from fraud. If you are business interested in E-Commerce website solutions, contact SIDEKICK internet marketing for more information.

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